Private entrepreneurs can solve our post office problem

When you look at how good the private enterprise does with deliveries and then compare it to how bad the federal government does with the same duties it is laughable. The answer to the federal post office problem is to encourage private entrepreneurs to fill the gap and provide competition for the post office in the delivery of first class mail.

I grew up in Memphis and I am very familar with a company called Federal Express and its president Fred Smith. Actually I have lived in Little Rock since 1983 and Federal Express was started in Little Rock in 1971 and then moved to Memphis in 1972. Entrepreneurs like Fred Smith need to be encouraged, not discouraged by government. Here is a funny Fed Ex Commercial from the 1980’s.

On July 3, 1981, I was in Prague, Czechoslovakia in the middle of a 20 country student tour. Our group of 48 American students had the opportunity to speak to a Communist government official for over an hour. We asked him several questions. My questions were quite direct and I share some of them at a later time.
However, I did want to share one question that I asked. I told the official about an entrepreneur from Memphis named Fred Smith. Back in the early 1970’s we heard about how Smith had this crazy idea about delivering overnight packages from LA to San Francisco via Memphis. Sounded like it would not work, but Smith was able to invest all his money and eventually it paid off. His idea was successful.
I asked the simple question: Could something like this happen here in Communist Czechoslovakia? He responded, “No. That is because no private citizen is allowed to own that much capital. The government must do things like that.”
There was no chance for entrepreneurs to exist in communist countries. I was simply pointing out that economic freedom allows an environment for entrepreneurs. Why would someone put the time and energy in putting together a grand plan like Fed Ex when the benefit and reward would just go to a communist government? Entrepreneurship should be encouraged, but many times today in the USA we find that our lawmakers pass laws that discourage entrepreneurs.

USPS: Stuck With the Government Business Model

Posted by Tad DeHaven

The U.S. Postal Service has released a new five-year plan for congressional consideration that it says would get the beleaguered government mail monopoly on sounder financial footing and thus avoid a taxpayer bailout. The plan repeats previous suggestions (i.e., workforce reductions, postal network consolidations, elimination of Saturday delivery, elimination of the retiree healthcare benefit funding requirement) and proposes an increase in the price of a first-class stamp from forty-five to fifty cents.

Whether or not it would achieve what the USPS hopes, it probably doesn’t matter given that asking Congress for greater operational flexibility is like asking a two year old to stop playing with their food. That’s why the focus should be on completely transitioning the USPS from a government-run business to a privately-run business (or perhaps businesses).

Over at the Courier Express and Postal Observer blog, Alan Robinson says that “just like all plans that came before, [the new USPS plan] started with the assumption that the Postal Service remains a quasi-governmental entity.” As a result, Robinson notes that the plan is missing two key ingredients for success that foreign posts have utilized: private capital and an expanded range of products and services.

In an essay on the U.S. Postal Service, I discuss how liberalization in other countries has enabled foreign mailers to diversify into non-postal activities:

Consultants at Accenture have found that diversification not only has a measurable impact on the performance of international posts, but that it is what ultimately distinguishes high performers from low performers. America’s relatively dynamic economy is particularly suited for the diversification opportunities that would arise under postal liberalization.

Germany’s former postal monopoly, Deutsche Post, illustrates the type of transformation possible by liberalization. Today, the private Deutsche Post World Net has changed its compensation structure, imported managers from other industries, modernized the mail and parcels network within Germany, and developed new products such as hybrid mail and e-commerce. The company now has interests in not only the traditional mail and parcels business but also express mail logistics, banking, and more.

Given that the USPS’s plan is going to be unpopular with various postal stakeholders (i.e., special interests), Alan says that they should consider the advantages of privatization:

It is clear that the business plan that the Postal Service has chosen is not the one that has worked in other countries. The plan avoids talking about either private capital or expanding the breadth of service offerings as neither is on the legislative table.    Introducing thinking about how private capital could be introduced and the product offerings could be expanded forces stakeholders to think about privatization, an idea that is nearly as unpopular as the changes that the proposed business model introduced.   However, as this brief post notes, privatization offers significant financial advantages that could reduce the operating and price changes envisions by the Postal Service’s business plan. Therefore, those who see the greatest harm from this plan need to see if the advantages of privatization could benefit their interests sufficiently to overcome long-held objections to the idea.

I think Robinson is right, but I suspect that the “stakeholders” believe there’s a good chance that Congress will ultimately come to their aid with some sort of taxpayer bailout. Therefore, it’s possible that they believe that it is in their best interest to continue fighting for the status quo. Unfortunately, the recent bipartisan federal bailouts of the financial industry and the automakers suggest that they could be correct.

Related posts:

Privatize the post office

The Arkansas Times rightly jumped on Republicans for whining about the local post office branches that were closing.  (It is sad to me that Republican Presidential Candidates are not very brave about offering any spending cuts.) The real answer is privatizing the post office. Here is a good article from the Cato Institute:   The USPS […]

Post Office on the brink of financial collapse

Post Office on the brink of financial collapse You’ve Got (No) Mail: Is the End Near for the Postal Service? By James Gattuso September 29, 2011 The United States Postal Service (USPS) stands on the brink of financial collapse. According to the Postmaster General, by next month, USPS coffers will be down to a week’s […]


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